Canada-United States trade policy beyond North America.

AuthorCherniak, Cyndee Todgham
PositionPROCEEDINGS OF THE CANADA-UNITED STATES LAW INSTITUTE CONFERENCE on An Example of Cooperation and Common Cause: Enhancing Canada-United States Security and Prosperity Through the Great Lakes and North American Trade: Cleveland, Ohio April 2-4, 2009

Session Chair--Elliot J. Feldman

Canadian Speaker--Cyndee Todgham Cherniak

Canadian Speaker--James P. McIlroy

United States Speaker--Donald B. Cameron, Jr.


MS. CHERNIAK: Good afternoon. I am going to talk about Canada's trade policy with respect to the Americas, but from a legal point of view, not from a government or government relations point of view. There is a document that can be located on the trade website entitled Seizing Global Opportunities, a Global Commerce Strategy for Securing Canada's Growth and Prosperity. (1) It's about a fifteen-page document. It does not say very much, but you can go look at it at your leisure. It does say that the Canadian government is going to support Canadian companies who are engaged in global commerce, which is your bread-and-butter-type of comment for companies that are selling or investing abroad and have formed partnerships with suppliers, producers, distributors, and innovators located around the world. (2) The Canadian government is going to do what it can to help those companies succeed and prosper in those foreign jurisdictions, (3) and one area that is a target area is the Americas. They say in that same document that they are going to boost Canadian commercial engagement and global value chains, (4) secure competitive terms of access to global markets, (5) increase FDI on a two-way basis, (6) and forge stronger links in the science and technology community and innovation networks. (7)

The reason for this is the concern in Canada of growing protectionism in the United States and around the world. (8) But, most importantly, in our number one trading partner. (9) If there is greater protectionism and policies of protectionism, we need to diversify. Just as my grandfather used to say to me in terms of investing, "diversify, diversify, diversify." So what we're doing at this point in time is looking around and seeing whether or not there are any opportunities to diversify because if there is protectionism, Canadian companies will survive if they have opportunities elsewhere and are not totally reliant on only one trading partner. This is where the Americas come in as a possibility.

I am going to discuss the free trade agreements, bilateral investment treaties, science and technology agreements, double taxation tax treaties, and air agreements that we've entered into recently and in the past few decades, and ask whether we have a trade policy that's focusing on the Americas or not. I think the conclusion is we are hot and cold with respect to the Americas. We are doing some things and we are being aggressive, but if you dig deeper on some of the other things, I think Canada can be doing more than it is doing, and there are opportunities to add to the agenda.

Looking at the free trade agreements in the Americas and those entered into by Canada and the United States, Canada currently has two free trade agreements in effect, Chile (10) and Costa Rica. (11) We also have agreements under negotiation with the Dominican Republic, (12) Honduras, (13) El Salvador, (14) Guatemala, (15) and Nicaragua, (16) and the CARICOM countries. (17) When you look at the United States, there is a fair bit of overlap. A number of the agreements that we have under negotiation, the United States has already entered into. (18) What is particularly interesting is what the United States has under negotiation, or I like to think renegotiation, right now because there are side agreements with Panama (19) and Colombia, (20) but they have not been put through Congress yet. (2) 1 There is a lot of overlap on the countries that we are both looking at in the Americas, and I think that Canada is now going to run a little bit further ahead because of the CARICOM countries and because Colombia will likely be put into effect in Canada. (22)

We started out with the Canada-Chile Free Trade Agreement. (23) That was Canada's second or third, (24) if you say that the Canada-United States Free Trade Agreement and the North American Free Trade Agreement (NAFTA) are two separate agreements, that is why I say second or third, and it is a comprehensive free trade agreement. It was really entered into because Chile was hopefully going to join NAFTA. And there were some interesting provisions in that agreement that have not been carded forward into subsequent free trade agreements that Canada has negotiated, but I thought that I would just point them out because it is something that Canada thinks about in its free trade agreement negotiations.

With respect to the Canada-Chile Free Trade Agreement, I do not think Americans would recognize this. We are not going to have anti-dumping cases or trade remedy cases between each other with respect to anti-dumping or countervailing duties. (25) That has been carved out in the free trade agreement. (26) Additionally, there is no dispute settlement mechanism in that agreement as there is in the NAFTA. (27) The other thing that is not in that agreement is that there is no prohibition of duty drawback. (28) NAFTA is the only free trade agreement Canada has that prohibits duty drawback from duty deferral. (29) The interesting thing for the Canada-Chile Free Trade Agreement and subsequent free trade agreements is that in the Rules of Origin, there continues to be the prohibition of transshipment. (30) This poses a problem when the United States is entering into similar free trade agreements because it would make sense that if a shipment was coming up from Chile or Peru or Colombia, goods would enter into the commerce of the United States and then be railed into Canada as opposed to the other way around. (31) The Rules of Origin do not allow preferential treatment if the transshipment occurs through the United States, (32) and that's something Canada needs to consider, and possibly change, with the Americas free trade agreements that they are entering into.

The Canada-Costa Pica Free Trade Agreement was entered into force in November 2002. (33) While it is a comprehensive free trade agreement, there are a number of chapters of NAFTA that are not in the Costa Rica Agreement. What I really want to discuss is the Canada-Peru Free Trade Agreement and the Canada-Colombia Free Trade Agreement, which are comprehensive free trade agreements, but each of them have some unique things that I just would like to point out. There is no IPR chapter in either of these two a free trade agreements. (34) We are not covering IPR and are not really discussing it except, in the preamble we have a commitment to TRIPS, but we have no chapter. (35) We have inserted within the agreement chapters on labor and employment. (36) We also have a side agreement in addition to the chapters that are contained within the free trade agreement. (37) With respects to dispute settlement provisions there is a carve-out in the chapters on labor and employment.

The dispute settlement mechanism within the free trade agreement does not apply to any dispute that arises under those provisions. Those are handled under the dispute settlement mechanisms in the side agreements. There is a procurement chapter in both of these agreements. (38) What's interesting about that is that Peru is not a signatory to the World Trade Organization (WTO) agreement on government procurement (39) and neither is Colombia, (40) so these countries are being brought into government procurement on a bilateral-by-bilateral basis. Hopefully, when they get to the multilateral, the WTO, they will think about that a little bit more when there is an opportunity to be brought into the fold, but the world is not going to end, and their commerce is not going to fall apart by entering into a procurement chapter in a free trade agreement. So there will be some valuable lessons learned through the free trade agreement process.

The Canada-Colombia Free Trade Agreement is going to have a little bit more difficulty getting through the House of Commons because it's opposed by the NDP, (41) and because the United Steel Workers Canadian Director came out last week strongly opposing the Canada-Colombia Free Trade Agreemerit. (42) It is on our new model. Canada-Colombia is a precedent that I like to look at, or the one that I'm looking at these days to see what has changed and what has evolved because it has been a while since Canada negotiated a comprehensive free trade agreement. So it might be the new model especially for dealing with the developing countries in the Caribbean. Just a few notable provisions are that the goods and tariff elimination schedules go up to seventeen years in the Canada-Colombia Free Trade Agreement. (43) In fact, they list some items as saying "E" items are excluded from any tariff reductions and any tariff eliminations. (44) I went looking for the "E's" and I found poultry, (45) some cheese, (46) some milk products, (47) and chocolate ice cream. (48) I do not think that I caught all the "E's" in the elimination schedule, but there are some items that are off limits.

The other thing that is very interesting in the goods chapter is it allows for increases in tariffs, so if Canada or Colombia agrees to faster elimination, they can bump it back up, and there is a provision that allows a bump-up to a previous tariff level. (49) There is a special safeguard transition period of ten years, (50) so that if there is a surge that leads to serious injury because of the tariff reduction, if the safeguard case is brought within ten years for the Canada-Colombia, or seven years for Canada-Peru, special safeguards can be put in place. (51)

One interesting thing is that the evolution of the Chapter 11 provisions is different from the evolution of the Chapter 11 provisions that you see in the United States free trade agreements that we are writing in parallel to some of the language that's being used. It is quite interesting that when you compared the two, we are both trying to make improvements to some of the language where...

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